Hey Andrew, I really appreciate your taking the time to reply in depth, considering I gave you a pretty hard time in my first comment. As you say, this is the reality of business these days, but I’m not sure that this is the right business approach ofr you.
Let me pick up on a few random points in no particular order…
the production company is like many others, and has just stopped paying up front for cues
Good side of this is you get a better royalty deal, bad part is all the time and expense of producing it is your financial risk and they take on no financial risk until they use the media asset. You seem to to be adopting an 'if you can’t beat 'em, join ‘em’ strategy here, but I think you might be better off reinvesting some capital in you rbusiness and building a different contractual framework. a book called ‘dealmaking in the film and television industry’ is mostly geared towards producers but if you pick up a used copy on Amazon you’ll find some model contracts in there for media releases and so on. You could also seek to hook up with a would-be entertainment lawyer.
I’m not a lawyer but I did spend some time in law school. I totally understand that you need to immunize yourself against the risk that the music has been sold elsewhere previously, and you can’t afford to get sued for breach of contract and try to pass it on to someone else - corporations may work that way, but you don’t have the cash flow. But that’s the whole point of contracts; they give you a way to establish trust relationships with people you don’t know personally, while reducing your legal exposure. so I think your best model is to set up a minimal LLC, get a solid contract, and then take a well-defined agency fee off the top before divvying up any royalty income.
To the last poster I ask this: what scenario in the music industry do you make money before putting money in? I really can’t think of one.
The problem is that people are not clear on what you’re doing - half your pitch is for sales/placement, the other half is about selling your own music (as part of the cue), which seems like a huge conflict of interest to most people.
It seems to me that you have two different things going on - you’d like to broker music cue sales (but right now you don’t have the legal security in place and you don’t want to get burned, understandably). the other part is that you want an investor to put $40k into your business in return for 50% of profits.
This latter is actually quite doable, especially if you can produce royalty statements documenting a steady and increasing flow of income over the last few years, which it seems like you probably can. I seriously, seriously recommend structuring this into a more conventional small business framework first. You’re in LA, right? Go into the local Small Business Administration office (Los Angeles | U.S. Small Business Administration) with your royalty statements and tell them ‘I have X cashflow and I want to turn this into a regular business.’ getting your paperwork set up for everything will cost a couple of thousand bucks but they’ll be able to give you guidance on how to raise some actual capital for this.
Oh also…
The music is no longer the commodity in the music industry. Beat production, mixing, mastering, recording; all are over saturated in this market. A&R, managers, marketing pros; same. The customer is no longer the record collector. YOU are the customer. Artists no longer pedal music, they pedal brands; their own and others. As an artist or producer, YOU are the target market for all the products.
That is actually true, there’s more money in selling stuff to people who want to make music than there is in selling music to people who want to buy it (unless you get really lucky). But, to keep in the in the entertainment industry for any length of time you have to call the buyer’s bluff and show you’re willing to walk away from their bad deal. After all, if you don’t get paid by them, they’re not going to pass their savings or increased profits on to you later (as I learned from bitter experience).
The people who want to make music simply do not have as much money, as a demographic, as the people who own the rights to media content. you can charge for a clear service (eg your mixing/mastering fees on your website are more than reasonable), but charging them ofr the privilege of maybe making money back from you later (as opposed to maybe selling their well-mixed-by-you track to a label or the public) is a confused business model, The problem in this particular case is that you’re selling and buying at the same time, whereas selling 50% of your future royalty income in return for $40/cue (in batches of $1000) is a much clearer/simpler business proposition.